Great Lakes Green 360

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Transcript of Great Lakes Green 360

  • 1.The Foundation for a LegallyGreenConstruction Practice Prepared For:Great Lakes Green 360 By:Patrick R. Drueke

2.

  • Patrick R. Drueke
  • Rhoades McKee, P.C.
  • Grand Rapids, Michigan
  • Patrick R. Drueke is a shareholder at Rhoades McKee.He helps individuals and businesses solve real estate disputes, real estate transactions, land development challenges, condemnation claims and construction matters.He is a Leadership in Energy and Environmental Design Accredited Professional (LEED AP), and is also certified by Green Advantage - Commercial/Residential.The LEED rating system is the nationally recognized benchmark for the design, construction and operation of high-performance green buildings.As a LEED AP, he can navigate clients through the evolving legal and regulatory requirements relating to green building, as well as assist clients through the LEED certification process from startup to final verification of a projects green measures.

3.

  • NAHB Gold Certified Home
  • Blansfield Builders
  • Darien, CT
  • Features :Reclaimed hemlock & heart pine for the ceiling, floors, & cabinets, 11kw solar photovoltaic system, high efficiency heat pumps, and countertops made from recycled paper, glass, & concrete.

4. Learning Objectives

  • Identify the underlying risks and liability potential in green construction.
  • Identify contractual provisions to mitigate legal risk.

5. Is ThereNewLegal Exposure for Green Building?

  • While the process of incorporating environmental considerations into the home building process is not new, todays green building activity is expanding quickly, and as with any emerging field the potential exists that mistakes will be made and the unexpected will occur.NAHB,Before You Build Green:A Primer on Liability Pitfalls .
  • Take proactive steps to reduce the risk that your green building project could become a major headache for you and your customer, ending in litigation. NAHB,Before You Build Green:A Primer on Liability Pitfalls .
  • As with other aspects of your business, the key is to accept risk knowingly.David Jaffe, NAHB Vice President for Construction & Liability Research, March 2007.

6.

  • The United States Green Building Council contends that there is no new legal risk in its paper:The Legal Risk in Building Green:New Wine in Old Bottles?
    • The paper suggests that liability risk associated with green building is nothing different than traditional construction (i.e. the novel liability associated with building green are . . . new wine in old bottles).
    • The paper suggests that the framework of legal liability is not new:local building codes and land use regulations must still be followed.
    • The paper suggests that there have been very few insurance claims against green design professionals.

7. The Legal Risks ofGreenBuilding

  • Green Building:Assessing the Risks A comprehensive study recently released by Marsh identified the top five risks facing green building projects:
  • Financial;
  • Standard of Care/Legal;
  • Performance;
  • Consultants/Subconsultants and Subcontractors; and
  • Regulatory.
  • http://global.marsh.com/news/articles/greenbuildingsurvey

8. Standard of Care/Legal Risks

  • Achieving the appropriate third party certification;
  • Competency of team members;
    • Training subcontractors may avoid unintended violations of the rating system, and produce more accurate bids.
  • Evolving building codes with the potential for strict liability standards.
  • Challenge determining an appropriate standard of care as green building expertise evolves;
  • Uncertainty with respect to allocating fault and determining responsibility;
  • Untested contract language;
  • Managing expectations .

9. Whaddya Mean by Green

  • The EPA defines green building as follows:
  • Green building is the practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building's life-cycle from siting to design, construction, operation, maintenance, renovation and deconstruction.
  • Manage expectations and avoid misunderstandings by clearly defining what green means in your contract.
  • State that the structure will be built according to the National Green Building Standard.
  • The as-built structure must then comply with the specified standard.

10. Regulatory Risks

  • An uncertainty about how the regulatory environment might evolve with respect to green building;
  • Concern that regulations might drive owners to seek warranties and guarantees;
  • Evolving green standards and interpretations governed by a non-regulated entity;
  • Mandates requiring a choice between third party standards;
  • Imposing mandates as opposed to offering incentives.

11. The Legislation of Green Building Requirements

  • Green building may be increasingly difficult to avoid:
    • Many federal, state and local governments now require that public buildings meet green standards.
    • Some state and local governments have extended green building mandates to new residential and commercial construction.
    • According to research conducted by the University of Wisconsin, in 2008 there were 134 mandatory green building programs in place in 118 counties in the United States.

12. Is There a Basis for this Concern?

  • A recent case in Maryland ( Southern Builders v. Shaw Development ) emphasizes the importance of understanding the applicable legislative scheme (mandate or incentive) and clearly describing the responsibilities of: the owner, design professional, contractor, etc.
  • InSouthern Buildersthe parties utilized a standard form contract, and incorporated a project manual, which stated that the project was designed to comply with a Silver Certification Level according to the USGBCs LEED Rating System.
  • Maryland offered state tax credits for LEED projects.
  • Projects could obtain the credit only after receiving a certificate of occupancy after construction was complete, and a submittal that the building meets the criteria necessary to receive the tax credit (i.e. LEED Silver) all within a specified time period .

13. Shaw Builders(Cont.)

  • There was no language in the contract documents obligating Southern Builders to secure any formal certification from USGBC.
  • The contractor was required to deliver a Certificate of Occupancy within 336 calendar days from the date of the agreement.
  • The contractor failed to deliver the COO, and as a result the project missed the deadline to obtain the tax credits.
  • The owner sued the contractor for $635,000in lost tax credits.
  • The lesson learned:
    • The parties failed to recognize the risk created by the regulatory scheme that led to the loss of tax credits.
    • The contract documents did not include a risk transfer mechanism with respect to securing the tax credits.

14. Pending Incentives in Michigan

  • HB 4124(Introduced January 27, 2009):
    • Tax credit equal to 50% of the total cost for the construction of a green building or the rehabilitation of a building into a green building and the expenses incurred to obtain LEED certification or $50,000.00, whichever is less.
  • HB 4193(Introduced February 5, 2009):
    • A credit equal to $5,000 for the purchase of an eligible green residential structure; or a credit of 30% of the costs incurred for an eligible renovation or addition or $2,000, whichever is less.
  • HB 4927(Introduced May 12, 2009):
    • Provides a tax credit equal to $50,000, or 50% of the cost of LEED certification (including third-party commissioning, consulting and verification costs) whichever is less for the construction or renovation of a qualified green building.

15.

  • HB 4575 (Introduced March 12, 2009):
    • Would amend the State Construction Code Act.
    • Permits local municipalities to adopt its own code consisting of either the National Green Building Standard, ICC-700, or the current version of Leadership in Energy and Environmental Design (LEED)
    • Current Status : Referred to Committee on Regulatory Reform
    • Potential legal issue :Unlawful delegation of governmental power, or too vague (to the extent a local municipality mandates the current version of LEED as opposed to a specific version of LEED).

Pending Mandates in Michigan 16. Existing Local Mandates

  • City of Grand Rapids Resolution No. 74599 :
  • All construction and renovation projects involving municipal buildings larger than 10,000 square feet and a cost of $1 million or more must receive LEED cer